Lumber Price Decreases, Lumber Supply Increases, and Home Buyers Stand to Benefit

The new construction sector of the housing market has been seeing positive signs. To briefly recap, the cost of lumber surged while COVID-19 was rampaging across the country, which caused the cost of new construction projects to skyrocket. In turn, this led new construction projects to slow down, further exacerbating the shortage of homes for sales across the country. During Q1 2021, lumber prices began to lower back down, and many analysts predicted the shortage of homes for sale would stop being an issue in the near future. Currently, many lumber dealers have excessive lumber inventory, which should drive the cost of lumber for new construction projects (and therefore the cost of new construction as well) further down. The net result is that more new construction projects will be started, and completed, which increases the supply of homes for sale. When the home-supply is high, the price of homes will become more manageable.
According to a survey, in July 2021, nearly 50% of lumber dealers reported they had an excessive amount of lumber, while none reported that their inventory was tight. This is in stark contrast to an April 2021 survey where only 17% stated they had an excessive amount of lumber, and 40% claimed their inventory was tight. As a result, the cost of lumber decreased; lumber futures have dropped 70% since they peaked in May 2021.
As lumber prices decrease, demand for new homes have skyrocketed; entities building new homes have begun restricting the number of projects they will take. While lumber isn’t the only item used in new homes, it does show that there is a light at the end of the tunnel when it comes to the inventory crisis that has plagued home buyers for the last year-and-a-half.
At the Chernov Team we understand that knowledge is power, and knowledge of the new construction sector’s prospects is powerful knowledge indeed. At the Chernov Team we know that whoever comes to the table most prepared leaves with the most, and the Chernov Team always leaves the table with the most.